As we enter May, Japan’s economic and investment sectors are abuzz with activity as major companies begin to unveil their fiscal year 2023 financial reports.
It’s crunch time, the annual report season.
Has Japan’s economy finally shaken off the shadows of the past? Is it on the brink of a new era of prosperity? The performance reports of the past year, particularly those of major companies, seem to hold the answers.
Just yesterday, on the “Insight Japan” public account, I penned an article titled “How Toyota Achieved a Groundbreaking ¥5 Trillion Profit.” According to Toyota Motor Corporation’s recent fiscal report, released on May 8th, their operating profit for the fiscal year 2023 soared by an impressive 96% compared to the previous year, crossing the ¥5 trillion mark for the first time in the company’s 91-year history.
But is Toyota the only one acing the exam this year? Let’s take a peek at others.
A survey by Nikkei on 170 listed companies that have disclosed their fiscal year 2023 financials reveals that Japanese manufacturing firms saw a whopping 23% surge in net profits compared to 2022, hitting ¥14.8 trillion, a record high. Conversely, non-manufacturing firms experienced a 7% increase, reaching ¥11.6 trillion.
The secret behind Japan’s manufacturing boom? Three main factors: product price hikes, a surge in sales (including exports), and the beneficial effects of a weaker yen on exchange rates.
But a healthy economy isn’t just about big names. It’s also about the smaller players.
For Japan’s manufacturing sector, giants like Toyota are the exception rather than the norm. The majority are SMEs, producing vital components. However, these SMEs have been grappling with challenges: rising raw material costs, increased labor expenses, and the need for equipment upgrades, all of which have squeezed profit margins.
This uneven distribution of profits contradicts the ethos of Japanese businesses – a philosophy rooted in mutual benefit.
So, another point of focus in Japanese society is how major corporations can redistribute their profits to suppliers. Toyota, for example, plans to increase supplier prices and provide economic aid for supplier equipment investments, allocating ¥300 billion of its profits back to suppliers in 2024.
Nissan and Nikon, among others, also aim to support their suppliers, recognizing that mutual growth is key to economic progress.
In conclusion, for Japan’s economy to truly flourish, it’s imperative to establish a symbiotic relationship between major corporations and SMEs, ensuring that everyone reaps the rewards of development.
What sets Japanese companies apart is their approach to treating their upstream companies, or suppliers, with a sense of partnership rather than just transactional relationships. This includes measures like fair pricing, providing economic assistance for supplier investments, and sharing profits.
This approach fosters long-term collaboration and mutual growth. It’s a stark contrast to the typical supplier relationships found elsewhere, often characterized by price squeezing and short-term gains.
The lesson here is clear: when companies prioritize the well-being and success of their suppliers, it creates a virtuous cycle of prosperity. Other companies worldwide could certainly benefit from adopting a similar mindset. By nurturing strong relationships with suppliers and ensuring their sustainability, businesses can enhance supply chain resilience, innovation, and overall performance.
In today’s interconnected global economy, the success of a company is intricately linked with the success of its suppliers. Therefore, prioritizing supplier welfare isn’t just ethical; it’s a smart business strategy that can drive long-term success and resilience.